This is the true scale of China’s bitcoin exodus


It took just over three months for bitcoin miners to totally disappear from China. New data from researchers at the University of Cambridge reveal the swift impact of Beijing’s crackdown on cryptocurrency mining, first announced in May 2021, in what would turn out to be just the opening shot of an across-the-board offensive against cryptocurrency activities in China.

The figures, gathered by the Cambridge Centre for Alternative Finance (CCAF) found that by the end of August 2021, the percentage of bitcoin mining taking place in China had “effectively dropped to zero”. That is a staggering reversal for a country that, as late as September 2019, was believed to be home to 75.53 percent of global bitcoin mining operations.

Mining is a process essential to the functioning of bitcoin and other cryptocurrencies. Bitcoin’s technical backbone, a decentralised ledger called the blockchain, is maintained by a swarm of computers across the planet. These computers, or miners, vie with each other to guess a number that gives them the right to append new transactions to the ledger, and receive some bitcoins in return. Mining bitcoins requires powerful computers and a lot of electricity: CCAF estimates that as of today, global bitcoin mining uses as much energy annually as the whole of the Philippines, a country of 109 million people. China, partly because of its vast supply of cheap energy, had been playing a key role in the sphere since the early 2010s, a fact which had made cryptocurrency users and developers worry over China’s excessive dominance in the sector.

China’s share of global bitcoin mining, in fact, had already decreased to 46 percent by April 2021, months before the government measures were unveiled, according to CCAF’s previous analysis. But the speech by a high ranking official on May 21, signalling that repression was on its way, sent Chinese miners scrambling for the exit: worldwide bitcoin mining capacity, or “hashrate”, dropped by 38 per cent. Initial reports told of mining entrepreneurs loading thousands of ASIC mining machines on trucks and relocating almost overnight to neighbouring countries such as Kazakhstan or Russia. CCAF’s data show that in July and August, the global hashrate climbed back by 20 per cent, which might indicate that some of those miners successfully managed to restart operations in other countries.

Among the winners of the redeployment are the United States, whose share of global mining shot from 16.8 per cent in April 2021 to 35.4 per cent in August; Kazakhstan, which now accounts for 18.1 compared to 8.2 per cent pre-crackdown; and Russia, whose hashrate share rose from 6.8 to 11 per cent.

CCAF suggests that global hashrate might soon fully recover whatever was lost after Beijing’s clampdown. An analysis published this week by cryptocurrency mining outfit Luxor Technologies says that, following a staggering halving in the wake of the ban, global bitcoin mining scored a 103 per cent recovery by the end of the third quarter of 2021, a rally driven mostly by North American miners.

It’s hard to fathom at this stage what impact this momentous geographical shift will have on cryptocurrency mining’s environmental footprint, which has come under increased scrutiny as bitcoin inched towards mainstream status. There are hopes that, if mining relocates to more regulated and environmentally conscious countries, miners will make bitcoin greener by turning more extensively to renewable sources. (As of 2020, according to a CCAF study, only 39 per cent of the electricity powering bitcoin mining came from renewable sources.) While there are reasons for some optimism when it comes to miners based in North America, miners that are now based in oil- and gas-rich countries such as Russia and Kazakhstan are unlikely to spearhead that transition anytime soon.



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